This week could be pivotal for the U.S. economy as we receive key economic indicators that will help assess the state of affairs during Donald Trump’s presidency. Data on employment, inflation, consumer confidence, and corporate earnings are expected, along with the first report on gross domestic product (GDP) for the second quarter. Most importantly – the Federal Reserve’s decision on interest rates.
Additionally, Trump’s trade policy is approaching a critical stage: Friday is the deadline set by the administration to resolve tariffs with over 200 U.S. trading partners. Trump’s top economic advisors are negotiating with China, while the appeals court will review the legality of most tariffs.
These figures may show that the economy remains resilient but is slowing due to complex tariff changes, reduced government spending, and the deportation of foreign workers.
Corporate Earnings and the Stock Market
This week, several major tech companies such as Microsoft, Meta, Amazon, and Apple will release their financial results, influencing market sentiment. Tech stocks have recently driven market growth as investors anticipate the expansion of artificial intelligence. According to FactSet, about 80% of S&P 500 companies have exceeded earnings forecasts.
Overall, stocks have recently reached record highs, supported by optimism about trade deals and better economic data. Trump has expressed confidence in his trade policy, noting that markets have hit new highs due to positive reception of tariffs.
Why it matters: strong earnings can support the stock market, which for some investors is starting to look expensive. It may also convince Trump that the market has accepted his plan to raise tariffs.
Consumer Confidence and Sentiment
This week will see the release of two indicators reflecting Americans’ attitudes toward the economy. The Conference Board’s Consumer Confidence Index has fallen to its lowest level since the pandemic, when Trump imposed major tariffs. Consumers express concern about the negative impact on the economy and prices, but optimism is beginning to rise with the start of trade agreements.
The University of Michigan’s consumer sentiment survey shows that buyers are wary of rising inflation. Although sentiment has improved, it remains subdued due to Trump’s trade policy.
Why it matters: economists closely watch consumer optimism because their spending accounts for two-thirds of the economy. When buyers expect prices to rise, they typically hold back on spending.
Gross Domestic Product (GDP)
GDP is an important measure of economic success and can validate Trump’s policies. However, this indicator has recently declined, with the first quarter of the year showing a contraction for the first time since 2022.
Economists expect improvement in the second quarter as imports normalize. However, they warn that inventory sell-offs may create the illusion of a stronger economy than actually exists.
Why it matters: the U.S. economy is large and resilient, but if Americans start to doubt it, the situation could worsen.
Federal Reserve Decision
Trump has repeatedly criticized Fed Chair Jerome Powell for reluctance to cut interest rates, but the bank is expected to keep rates steady at Wednesday’s meeting. Two board members may vote against the consensus, something not seen in the last 30 years.
With the labor market remaining strong, most Fed officials believe the economy can withstand high rates. At the same time, they want to see how Trump’s policies affect inflation and the job market.
Why it matters: a rate cut in September would be a positive sign for Americans looking to borrow, especially first-time homebuyers.
Inflation and the Personal Consumption Expenditures Index
The Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, has been rising slowly lately, moving away from the 2% target. This is one reason the bank is holding off on cutting rates.
Why it matters: consumers accelerate purchases to avoid price increases, but July’s data may reflect the consequences of Trump’s unstable trade policy.
Trade Tariffs and Negotiations
Trump announced the end of the pause on major tariffs as of August 1. During this time, the administration reached preliminary agreements with several countries. Trump also plans to send letters to about 200 countries unilaterally imposing tariffs.
Why it matters: Trump’s tariffs have raised the average U.S. customs duty rate to the highest level since 1934, potentially leading to additional costs for the average American family.
Negotiations with China and Court Hearings
Negotiations with China continue, and the U.S. Treasury Secretary will meet with Chinese officials to finalize deal details. Trump imposed high tariffs on imports from China, to which Beijing responded with similar measures.
Why it matters: one of the Trump administration’s goals is to reshape China’s economy by reducing the global surplus of Chinese goods, potentially opening markets for American manufacturers.
Labor Market and Employment Report
The July employment report is likely to show a decline in the average monthly job gains. The labor force is shrinking, which may indicate the impact of anti-immigration policies on employment.
Why it matters: the U.S. labor market has been a strong point, but cracks are now appearing, and Americans losing jobs are remaining unemployed longer.